2020 (5) TMI 663 - Tri - Insolvency and Bankruptcy

Approval of Resolution Plan - section 30(6) of the Insolvency Bankruptcy Code 2016 - HELD THAT - The Resolution Plan is in conformity of section 30 (2) of the IBC and Regulation 38 of the CIRP Regulations. The Resolution Plan also includes the mandatory contents of the Code. In the vogue of the current pandemic COVID-19 Virus, the RBI announced Developmental and Regulatory Policy in the public interest. The Reserve Bank of India (RBI) announced an extension of the moratorium on loan EM's by three months, i.e. August 31,2020 vide statement on Developmental and Regulatory Policies which sets out various developmental and regulatory policy measures to improve the functioning of markets and market participants; measures to support exports and imports; efforts to further ease financial stress caused by Covid-19 disruptions by providing relief on debt servicing and improving access to working capital; and steps to ease financial constraints faced by State Governments - In view of the relaxation so granted by R.B.I as Developmental and stated above, the claim of Resolution Applicant in Regulatory Policies , respect of the concession /relaxation in the time line for payment to its Financial Creditors/Operational Creditors/Other stakeholders, if any, is genuine and bonafide, therefore, Resolution Applicant deserves relaxation/concession. Such relaxation in the time frame or timeline for payments is/are not going to change the nature and character of the Plan, moreover such concession/modification is approved by UCO Bank having 83.31% stake, while SBI is having 16.69% stake, but UCO Bank has approved the relaxation, so sought for by the resolution applicant in timeline for the payment. However, SBI though approved its first tranche of payment but have reservation in 2nd tranche of payment. It is needless to mention herein that, the very object of the IBC is, Resolution is the rule and Liquidation is an exception , liquidation brings the life of a Corporate to an end. It destroys organizational capital and renders resources idle till reallocation to alternate uses. Further, it is inequitable as it considers the claims of a set of stakeholders only, if there is any surplus after satisfying the claims of a prior set of stakeholders fully. The IB Code', therefore does not allow liquidation of a corporate debtor directly. It allows liquidation only on failure of 'Corporate Insolvency Resolution Process'. This Adjudicating Authority, is of the considered opinion and also being satisfied that the Resolution Plan as approved by the Committee of Creditors (COC) meets the requirements as provided under section 30(2) of the Code, along with revised/concession/relaxation, so sought for, by Resolution Applicant on the timeline of payment to Financial Creditors/Operational Creditors and/or other stakeholders, as the case may be, which also became part and parcel of Resolution Plan dated 12.02.2020 - Resolution plan approved.

Summary

Issues Involved:
1. Approval of the Resolution Plan under Section 30(6) of the Insolvency and Bankruptcy Code (IBC) 2016.
2. Compliance of the Resolution Plan with statutory requirements.
3. Modifications in the timeline for payment due to COVID-19 pandemic.

Issue-wise Detailed Analysis:

1. Approval of the Resolution Plan under Section 30(6) of the Insolvency and Bankruptcy Code (IBC) 2016:
The application was filed by the Resolution Professional (RP) for approval of the Resolution Plan for the Corporate Debtor, M/S. Digjam Ltd. The Corporate Insolvency Resolution Process (CIRP) was initiated by an operational creditor, M/S Oman Inc., and the application was admitted on 26/04/2019. The Committee of Creditors (COC) was constituted, and the Resolution Plan submitted by WS Finquest Financial Solutions Pvt. Ltd. was approved by the COC with a 100% voting share.

2. Compliance of the Resolution Plan with statutory requirements:
The Resolution Plan was examined for compliance with various sections of the IBC and CIRP Regulations. It was found to meet the criteria under Sections 25(2)(h), 29A, 30(1), 30(2), 30(4), and 31(1) of the IBC, and Regulations 35A, 38(1), 38(1A), 38(1B), 38(2), 38(3), and 39(2) of the CIRP Regulations. The plan included provisions for payment of insolvency resolution process costs, debts of operational creditors, financial creditors, management of the corporate debtor, and implementation and supervision of the plan. It also addressed the cause of default, feasibility, viability, and capability of the resolution applicant to implement the plan.

3. Modifications in the timeline for payment due to COVID-19 pandemic:
Due to the financial difficulties arising from the COVID-19 pandemic, the Resolution Applicant sought modifications in the timeline for payments to financial and operational creditors. The revised schedule included an initial payment of ?27.14 Crores within 90 days of the resolution plan approval or 15 days after the end of the lockdown, and subsequent payments of ?20 Crores, ?23.93 Crores, and ?23.93 Crores at intervals of 180, 410, and 775 days respectively. The COC, particularly UCO Bank with an 83.31% voting share, approved the revised timeline, while SBI, holding a 16.69% share, partially agreed.

Conclusion:
The Tribunal approved the Resolution Plan with modifications in the payment timeline, emphasizing that the plan was in compliance with statutory requirements and the modifications were justified due to the pandemic. The approval was granted with immediate effect, subject to existing laws and necessary approvals to be obtained within a year. The RP was directed to forward all records to the Insolvency and Bankruptcy Board of India. The application IA 144/19 was allowed with modifications, and other pending applications were disposed of.